J.P. Morgan’s Legal Pains in Charts

J.P. Morgan in recent years seized Bank of America's ' crown as the nation’s largest bank by assets and deposits. Now J.P. Morgan is wresting a more ignominious crown from BofA: Legal Punching Bag.

As WSJ wrote today, J.P. Morgan is facing broad legal and regulatory issues and has made fixing its house the No. 1 priority this year. The costs for all these legal issues are heading northward and the bank is now rivaling Bank of America for spending on legal issues.

Since the start of 2011, J.P. Morgan has recorded $7.9 billion in legal costs, according to a tally scored by Barclays analyst Jason Goldberg. The biggest chunk of that came at the beginning of 2012 when it recorded a $2.5 billion charge tied to mortgages.

But while BofA’s costs over the same period are above $9.4 billion, its litigation spending has been trending down sequentially in each of the past three quarters. J.P. Morgan’s headed up in each of the previous two quarters.

Meanwhile, J.P. Morgan’s disclosure regarding what it believes are “reasonably possible” legal losses, above what it has already set aside, is at its highest point in the past two years, the Barclays data shows.

The bank disclosed it faces up to $6.8 billion in potential legal losses, if all goes wrong, a scenario its lawyers don’t believe is likely. That tally compared to BofA’s $2.8 billion worst-case scenario loss, though J.P. Morgan has had a bigger prediction since the start of 2011.

In his annual letter to investors this year, Chairman and CEO Jamie Dimon said compliance was the bank’s top focus, including creating a new management group reporting to COO Matt Zames to target issues. The bank is also shifting thousands of employees to handle the issues, just as it would in an acquisition, Mr. Dimon wrote.

“Let me be perfectly clear: These problems were our fault, and it is our job to fix them. In fact, I feel terrible that we let our regulators down,” Mr. Dimon wrote. “We are devoted to ensuring that our systems, practices, controls, technology and, above all, culture meet the highest standards. We want to be considered one of the best banks – across all measures – by our shareholders, our customers and our regulators.”